The blog-o-sphere is alight with rumors that Sears Holdings Corp. chairman Eddie Lampert is itching to make another large acquisition. It is not the first time analysts, bloggers and journalists have speculated that the Oracle of Greenwich would expand his retail empire.
Dealscape is no stranger to speculating about retail mergers. Back in August when Sears reported strong earnings, Dealscape created a short list of retail companies on the auction block that might make for ideal targets. However, none of those companies appear on the latest lists.
Most competing suggestions are bigger names: Anheuser Busch Cos., Gap Inc., Home Depot Co. and Safeway Inc. The first and last companies on the list seem the most absurd because neither fits well with Sears' department store business. The Anheuser Busch purchase is so absurd that it doesn't warrant any analysis. Although a Safeway purchase also seems like a long shot, it makes more sense than the Anheuser Busch suggestion. Arguably Safeway could provide the downscale Kmart and Sears Grand stores more economy of scale when it comes to purchasing groceries and other sundries. However, the grocery business is not a very profitable one, and Sears Holdings already is struggling with its Kmart unit.
Gap and Home Depot are far better options for Sears, which does a big business selling apparel and tools. Home Depot would make for an excellent opportunity for Sears because it would provide an additional outlet to sell higher-margin appliances and tools. Under Sears ownership, Home Depot could carry the Craftsmen line of tools and Kenmore appliances. In addition, the well-regarded Craftsman and Kenmore brands could give Home Depot a huge leg up over rival Lowes. As for the Gap, Sears' management of apparel brands has been spotty at best, so Gap might want to pause before accepting Lampert's money.
Nonetheless, we still stand by our list of alternative candidates. Some, such as Yankee Candle, have been taken off the block, but the vast majority remain. The two to watch would be Foot Locker and Pier 1. Sears already has a home-decor chain, the Great Outdoors, so Pier 1 could become a perfect opportunity to expand in the market. In addition to Foot Locker and Pier 1, we still like MarketWatch columnist Herb Greenberg's suggestion that Sears buy Lampert's other retail portfolio company AutoZone. —Matthew Wurtzel
See story from Blogging Stocks
See earlier post from Dealscape
Possible targets for Sears
Consumer and retail businesses on the block |
| Name |
Auction likely
price range
($ millions) |
Business |
| BabyUniverse |
n/a |
Online retailer |
| Le Chateau Inc. |
$ 265 |
Canadian retailer of trendy clothes |
| Woolrich Inc. |
$90 |
Apparel maker |
| Pier 1 Imports Inc. |
n/a |
Home furnishings retailer |
| RedEnvelope Inc. |
$100 |
Online and catalog gift retailer |
| True Religion Apparel Inc. |
$400 |
Apparel retailer |
| Foot Locker Inc. |
$4,000 |
Sneaker retailer |
Federated Department Stores Inc.
bridal group |
$700 |
Bridal and tuxedo shops |
| Vivarte |
$ 1,900 |
European retailer |
|
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